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A Long Awaited Market Tumble

Well saying this is a market ‘tumble’ is really a stretch–but I have hoped for lower equity prices for a long time, so I take what little the market gives me. I would be happy seeing the DJIA down a few thousand points – but alas I doubt that will happen–too much money sloshing around.

I don’t buy common shares, but I know that the more the market stretches higher the steeper it will have to correct when the time arrives.

Interest rates are moving lower by 3-4 basis points–putting us smack dab into ‘goldilocks’ territory. I continue to believe rates will be moving higher through the year, but a pause or drift lower is always welcome.

Today I am doing nothing at all in the markets. I have spent the day doing some reading on Canadian Preferreds–very interesting with lots of folks chatting and discussing on the Canadian Discussion page. Just reading a bit makes me feel very inferior compared to the smart folks over on that page. I think in the near future I need to expand coverage of these Canadian issues (like I have time to do that!!).

I do have a couple more issues to highlight that I have bought recently–sure not investment grade issues, but I have to have some money deployed. I will write on them tomorrow.

33 thoughts on “A Long Awaited Market Tumble”

  1. Tim, You should collaborate with Yuriy, his Canadian GSheets are great, already done, obviously alot of work and update from whatever source he is using. There are a couple of entries that occasionally need to be updated, but the common sense behind the structure usually fills in once familiar. CNs are getting the call cabash too with no roll out to new issues. Personally, I am eating cake now.
    Re: Foreign Tax. It is a line item that comes off of the brokerage end of year report (in its own box), not another IRS form. At least that is the way I have done it!

    1. Joel–I was looking at one of them yesterday and yes I agree that he/she brings great value.

    1. You would if you are a U,S, citizen. The taxes at 15% are withheld from the payouts. When you pay your U,S, income taxes, you can file to offset the Canadian income taxes that were withheld, as the USA and Canada have a tax treaty in order to avoid double taxation.

      1. In theory, you shouldn’t get hit with the 15% withholding if you own Canadian securities in a tax-exempt US retirement account (like an IRA). That is what the treaty says – but I have never had much luck getting brokerages to handle it correctly.

        Also, I think you have to file a form with your broker to claim benefits under the treaty (or at least you used to have to do so) – but things may have changed.

        1. All the Canadian issues I hold in retirement accounts are held at Vanguard. This includes both common and preferred shares. Vanguard handles the taxes correctly in 100% of the cases, meaning no withholding.

          I did have to beat Vanguard up some on a Brookfield Renewable issue. BEP is actually Bermudian, not Canadian, but most people think of it as Canadian. “How can there be withholding tax when Bermuda doesn’t have a corporate income tax to withhold”? I won the argument but it took work. Not worth the effort unless it is a good amount of shares at issue.

          In taxable accounts everything Canadian I hold is at IBKR. Perfect handling of taxes.

          There are many horror stories of improper handling of tax issues at other brokerages, so I don’t go there. Schwab got taxes wrong 100% of the time. TDA got them right but charged large fees on too many things. 50 buck fee on a call when two other brokerages charged me nothing?

          1. Not 100% wrong at Schwab but very close. Now I only hold BKFAF in a retirement account and there’s no withholding. I hold it as somewhat of a hedge against rising rates.

            I believe they don’t tax TMSOF or SLFSF either in retirement accounts.

            1. I am a very long time customer of TD Ameritrade and have had no problem with this issue. Then Schwab bought them and I can’t get them to not change me foreign taxes on KCDMY – a stock with Mexico in it’s name.

              I love Think Or Swim but I have no love for Schwab.

          2. For what is worth, I have held a number of Canadian issues (ENB, BCE, RY, PBA) in an IRA with Schwab and they got it right. Maybe I am “due” but they seem to understand the rules.

            1. Are you talking about preferreds or commons? Schwab gets withholding tax right for most Canadian commons. However, for most Canadian preferreds, Schwab will withhold tax on dividend payments.

              1. Schwab wont classify dividends from Canadian preferred as QDI, meaning you’re paying a much higher tax rate (ordinary rates) than need be. Schwab is the only one of the 4 U.S. brokerages that I work with that makes this mistake.

                I have no idea how Schwab handles dividends on Canadian common.

            2. Seems that the Schwab issue is just in taxable accounts. 15% withholding on Canadian preferred is correct but almost 100% of Canadian preferred (and common) generate QDI, which Schwab doesn’t get.

              I go where I’m treated best. That’s Vanguard for most things, IBKR for foreign markets, institutional issues, and currency futures, TDA for a few things and Schwab for bupkis.

              1. Sadly, Schwab issues are NOT just in taxable accounts.

                Schwab gets Canadian preferreds wrong in IRAs with great regularity. Withhold when they aren’t suppose to. They blame the Canadian custodians, but other brokerages get it right – as others have pointed out.

                I had a long run around with them a couple of years ago.

                1. Interesting but not surprising.

                  I’ve held the same Canadian preferred issues in multiple accounts in the past (I mean the identical same issues, same tickers) and had 3 different brokerages handle them in 3 different ways. And the ones that got it wrong blamed someone else. CRA, IRS, paying agent, transfer agent, the guy behind the bush, so forth. Whether the people I spoke with were ignorant or deliberately deceptive I don’t know and it doesn’t matter.

                  I go where they get it right or, if they make a mistake, they correct it. For me, that’s been Vanguard and IBKR.

          3. I went over this before, but that Brookfield is a Bermudian disregarded entity that owns Canadian real estate.
            If Vanguard refunded your taxes, they must have lied to the Canadian custodian about your status.
            Netflix is tanking today, falling to a price last seen 3 weeks ago

              1. I don’t remember the ticker. It IPO’ed in March and I found the prospectus on SEDAR and the tax section of the prospectus was crazy complicated, and the reason you got withheld on is a anti-tax evasion provision of canadian law called Article XII IIRC. If SEDAR had links like Edgar, I would post them.
                and there are a bunch of different brookfields.
                asset, reinsurance, business services, so it is tough to post a link to the prospectus.

      1. It is nearly impossible to understand another statement posted like this, “I would be happy seeing the DJIA down a few thousand points…”.

        Happy to see some fellow investors losing hundreds or hundreds of thousands (or more) of dollars in order to benefit some others for celebrations of steak dinners?

        The About/Terms section of the site states: “The primary intent of the Innovative Income Investing website is to provide education.”. That would seem to indicate a collaborative effort on all our parts to help each other put food on our tables and leave some scratch for our kids and grandkids.

        I have a ~50/50 split approach and I believe others here have a split approach as well. Innovating income comes in many flavors and the education is lost on me again in this case when happiness is found in the downfall of others. I don’t eat steak and maybe I just can’t see the tongue in the cheek, again.

        1. A4I. The primary intent is education. But that doesn’t mean primary = 100% education. One of the things Tim does is create all the categories for sharing and education. Uhaul, Earnings, Dividends, Company News, Baby Bond Calls, … these are where the “primary” goal is to educate. What makes a site unique is for an editor and others to form an opinion, vent, and present other ideas and commentary that are not necessarily 100% fact/educational. These add personalization to a site, fosters collaboration, offers a change of pace to the facts of announcements, calls, etc. It gives a unique flavor to this site, as many sites out there offer facts and education, but they don’t necessarily have an environment that fosters collaborations and good discussion.

          This page and some others are more like editorial pages. This offers Tim the chance to show his unique style/voice, offer opinions on his application of financial happenings, etc.

          When in doubt… seek to understand someone. Firing off comments and making assumptions is not seeking. What helps me is more of a rounded approach to life. Exercise and walk 2 miles/day, eat 4 food groups (including meat), collaborate and communicate with people. Lastly, when communicating with someone, try to talk 10% of the time and listen 90% of the time and you will learn a lot. I noticed that when you speak 90% of the time, you begin to think that you are always right, no-one’s thoughts/ideas matters, and you begin to think you are the smartest guy in the room.

          1. Mr. C,
            From your keyboard, “Firing off comments and making assumptions is not seeking.”. Interesting hypocrisy, as one scans your entire last paragraph. I’m not going to be shouted down by you. Perhaps you will consider noticing that my comment was a direct nested reply to Tim? Maybe you’ll notice the question mark I posted which would indicate a seeking of clarification from the posts author?

            1. Alpha4I. The reason I make a statement about seeking to understand…

              Do you really think that Tim is “Happy to see some fellow investors losing hundreds or hundreds of thousands.” Really? My kids would say, “that is tarded.” So then, what is the point of making an outrageous cut on Tim like that? It is either hatred (which about 20% of your posts are either cutting people down and have a hatred sensitivity about them), or you didnt have a balance diet today. If you line up 10,000 people and read an editorial post, I would bet that 10,000 people would not think for once that Tim wants people to lose money in the stock market. But then, there is your statement, and i simply dont get why even post something like that.

              1. C,
                You’re still trying to shout me down – not happening. I respectfully responded to your post with clarifications but now you’re off the rails. Let’s keep it moving and go on about our days.

        2. A4I, I don’t think Tim is wishing for anyone to lose $$, he simply realizes that markets move in cycles. The long-term trend in the equity market follows long-term economic growth, the big difference is the volatility in the equity markets above and below that trend line. I believe we’re all relatively long-term investors and volatility is our friend, it helps us deploy capital when fear rises and harvest gains when greed accelerates.

          1. Chris,
            Appreciate your points and I understood them 35yrs ago, however, being probably one of the first 5 participants on this site starting years ago right behind Gridbirds arrival – I’ve seen this and similar comments made periodically and there really doesn’t seem to be much ambiguity. Yet, there is room for miscommunication – so I posed a question. Again, this is why I said “maybe I just can’t see the tongue in the cheek…”. If Tim would like to respond, great, I’m interested in hearing what he has to share. If not, we’ll keep it moving.

        3. While I am not Tim, either, I would assert that part of the education is learning how to navigate and prosper from down trends in the market.

          No one will lose hundreds of thousands of dollars if they do not sell when the DJIA is down thousands of points. And those holding high quality preferreds will still see their dividends show up. I’m personally a bit of a market pessimist and appreciate down days as they allow me to add to my holdings – common and preferred. In the long haul, sure, up days are better.

        4. A4I–sorry you are in disagremeent with me and I certainly didn’t mean to offend anyone and certainly don’t wish monetary loss. I do have opinions and I simply would prefer common stocks to cool off from what I believe is a dovish monetary environment which has created substantial froth (my opinion). We all have opinions and there is not anything wrong with stating them without an attack on anyone. Consider your comment duly noted.

          1. At the risk of being late to this discussion and beating a dead horse, I hope my comments are constructive. And I am not usually the politically correct type. But I too own a mix of common and preferred shares. And I do understand where A4I was coming from because I have seen similar comments hoping the market would fall from various folks over the years which could seem to be wishing losses on some. And when one says I don’t own common shares and I would be happy seeing the DJIA down a few thousand points – well it certainly can be interpreted negatively even if that was not the intent.

            I think the point could have been better made saying something along the lines of “I believe the market is overheated and I have been waiting for a pullback for some time now”

            We all have different opinions which is great because that helps people learn. But how we state them matters. I am one who is usually fully invested as I don’t try to time the overall market (except perhaps on the fringes) . So for me, I try not to make general comments that “it is foolish for someone to be sitting 50% in cash” (even though that my investing philosophy says that is the case) . To me that could be interpreted negatively just like wishing for a market crash. Rather if I did comment, I would try and frame it more as are you not worried that your uninvested cash is keeping up with inflation?

            Again, words matter. We have a wide variety of investors and philosophies here. One can and should share their opinion to get their point across but do try to understand how your comment may be interpreted by others with a different philosophy

          2. Thanks for the clarification, Tim. Actually, I do agree with you in that there is some baseless froth in the market – most notably on the common side of the ledger and there is no reason to believe that the ink spewing from the printing presses will be drying up anytime soon. Almost daily, I’m alerted to another corp that is announcing pricing increases due to input and transportation costs (read ‘inflation’). At some point, we’re going to have to stop dancing and just face the music – and have another ‘end of 2018’ event or likely much worse.

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